CHICAGO — The Illinois Supreme Court this week left intact a lower court ruling that keeps alive efforts to resurrect litigation that resulted in a $10.1 billion verdict against Philip Morris USA Inc. in a case over the company’s marketing of “light” cigarettes.
The Supreme Court declined to hear Philip Morris’ appeal of a lower-court ruling. Originally, a Madison County judge in 2003 awarded plaintiffs $10.1 billion in compensatory and punitive damages in Price v. Phillip Morris, now part of Altria Group Inc., for misleading customers in marketing materials into believing that so-called light cigarettes were safer than regular ones.
The Illinois Supreme Court overturned the verdict in 2005, ruling that the Federal Trade Commission allowed for such labeling. The U.S. Supreme Court let the ruling overturning the verdict stand in 2006. The plaintiffs sought to revive the case after a 2008 ruling by the U.S. Supreme Court that allowed smokers to use state consumer protection laws to sue cigarette makers for promoting light or “low tar” cigarettes.
The circuit court denied the petition to reinstate the case late last year but earlier this year the appellate court reversed that decision and said the litigation should be heard by Madison County courts. The ruling this week leaves that order intact.
Veteran tobacco analyst Dick Larkin, director of credit analysis at Herbert J. Sims & Co., characterized the development as a negative for the sector, as the rally from 2005 to 2007 was driven by investors’ belief that the legal landscape for tobacco companies had improved.
“This is just more bad news in a sector that continues to see stress from prolonged higher-than-average consumption declines and the ongoing dispute over $7 billion in the participating manufacturers dispute between the states and tobacco companies,” he said.
Most tobacco bonds are backed by payments made under the 1998 Master Settlement Agreement that requires tobacco manufacturers to make annual payments to states and other municipalities based on consumption and other factors.
The plaintiff’s law firm, Korein Tillery, praised the court’s latest decision. “After a long journey through the courts, we believe this decision moves the judgment a step closer toward a final confirmation for the 1.1 million Illinois consumers who were represented in this lawsuit,” a statement read.
Philip Morris said in a statement: “Today’s decision is purely procedural and not a decision on the merits. The decision simply means that plaintiffs are allowed to present their petition to the trial court. We look forward to presenting our responsive arguments about why state law makes it clear that the plaintiffs cannot reopen this case.”